Demand growth outstripped capacity increases of 4.4 percent for passengers and about double that for cargo, the International Air Transport Association said.
"After the biggest demand decline in the history of aviation in 2009, people started to travel and do business again in 2010," said outgoing IATA chief executive Giovanni Bisignani. "Airlines ended the year slightly ahead of early 2008 volumes, but with a pathetic 2.7 percent profit margin. The challenge is to turn the demand for mobility into sustainable profits."
North American carriers saw passenger demand increase by 7.4 percent in 2010 - almost double the increase in capacity last year - leading to significantly higher profits.
European airlines had increased passenger demand of 5.1 percent - again double the capacity increase. Europe was hardest hit by the harsh December weather though, which slowed demand growth for the continent to 3.3 percent that month compared to November.
Carriers in the Asia-Pacific region - led by China and India - recorded 9 percent year-on-year growth in passenger demand in 2010.
Geneva-based IATA, which represents some 230 major international airlines, said the coming months would be marked by oil price uncertainty. An earlier forecast of $9.1 billion industry profits in 2011 was based on an oil price of $84 a barrel.
With turmoil in the Middle East driving prices higher, Bisignani warned that airline profitability could be squeezed. "For every dollar increase in the average price of a barrel of oil over the year, airlines face the difficult task of recovering an additional $1.6 billion in costs," he said.